–BOE Survey Shows Yr Ahead Inflation Expectations 2.4% Vs 2.1% In Feb
–Public Estimates Of Current Inflation Fall To 4.0% Vs 4.2% In Feb
–Net 17% Satisfied With The Way BOE Doing Its Job
LONDON (MNI) – Inflation expectations have risen, climbing further
above the inflation target, according to the latest survey by the Bank
of England.
Median inflation expectations for the year ahead in the May survey
rose to 2.4% from 2.1% in February, according to the BOE GfK/NOP survey.
The public believed the current rate of inflation was 4.0%, down from
4.2% in February.
The survey shows the public overestimated the current rate of
inflation. In April, on the CPI target measure it was 2.3%, still above
the BOE’s 2.0% target, while RPI was negative, at -1.2%.
Former MPC member David Blanchflower recently co-authored a paper
which found a correlation between inflation expectations and education,
with those with lower educational levels tending to over-estimate
inflation.
The BOE survey found that less than half, 44%, of respondents
expected interest rates to rise over the next 12 months, up from 33% in
February. A mere 10% of respondents expected rates to fall over the next
12 months, down from 18% in February.
Asked what was best for the economy, 25% thought interest rates
should go up, 17% thought they should go down and 34% thought they
should stay where they are.
Recent experience has highlighted the limited significance of
inflation expectations. Inflation expectations climbed in 2008, with
year ahead expectations peaking at 4.4% in August, but wage inflation
remained subdued throughout and with wage deflation becoming
increasingly prevalent in 2009.
GfK NOP interviewed 2,099 people for the latest inflation survey,
between May 7 and 12.
The following table shows the key findings
Inflation Inflation
Past 12 Next 12
Months Months
Nov 06 2.9 2.7
Feb 07 2.9 2.7
May 07 3.1 2.7
Aug 07 2.8 2.7
Nov 07 3.2 3.0
Feb 08 3.9 3.3
May 08 4.9 4.3
Aug 08 5.4 4.4
Nov 08 4.9 2.8
Feb 09 4.2 2.1
May 09 4.0 2.4
–London newsroom: 4420 7634 1623; email: drobinson@marketnews.com
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